Changing the Mandarin's power made you lose an essential part of the dynamic between Tony Stark and the Mandarin. Look back to IM1 (and IM2 to a certain extent) and you'll see that one of the themes is that it's always a battle of technology and wit: 1) Tony Stark intentionally weakens himself by using an outdated arc reactor so that he can stop Obadiah Stane (even with this "disadvantage" of the outdated arc reactor, he still knew the Iron Monger/Mark I's disadvantage and used it to his advantage). 2) Once Tony Stark sees that the palladium core is poisoning him, he revisits his father's old Vibranium project and uses it as a viable element for the arc reactor. With the Mandarin, you see Tony Stark completely outwit as he doesn't have a clue how alien tech works and finally puts him at a pretty big disadvantage. Add that the Mandarin had advanced martial arts skills and you have a very strong villain that can outwit, outfight, and outlast Tony Stark.

Plus, using JeremyJahns' analogy, to consider the Mandarin as real through Aldrich Killian's character is false considering that it's the same as saying Santa Claus is real because your Dad is playing the character. At the end of the day, it's a facade...the concept exists, but that doesn't make it real.